Good bye, Time Warner
Today was my last day of employment at Time Warner Cable. I have been with the company 7 years - long enough to have earned a pension!
The reasons for my decision to leave are far too complicated to go in to here. Suffice it to say that I was made a better offer by Martin's Point, a health care provider. I will be starting work there next week.
But for now, I have a 4 day weekend and I am going to endeavor to get over this post-last-day depression that is plaguing me.
I'm going to miss my DWDM network, which was the closest thing I had to a child. But moreso, I will miss so many of the people I worked with. All right, I better sign off before this welling in my eyes starts messily running down my face.
I lied
When I said I'd hold JDSU until it doubled. I have been so staggered by JDSU's recent move up that I decided to lighten my position by 1/4, as my holdings were up 36% in a very short time.
SWC had another speculative move upward today, coming up with a luscious 10% gain. My options were up more than 100% so I sold them off. What a cash cow. I will of course look to get back in to SWC on a dip.
To stay in the precious metals I bought shares of Hecla Mining (HL) for 5.46. This is a great, solid, American-based silver and gold miner with a highly volatile stock leveraged to the price of silver.
I also used some profits to buy Corning (GLW) May expiring calls.
And I have not mentioned that I recently purchased a single September 65 RIMM put, as a minor hedge against a tech downturn. Also because I believe RIMM is eventually doomed to failure - though at a point well beyond my strike date. This is a riskier kind of hedge that obviously hopes for greater returns. But all I require out of it is that it leave me with some cash if the market crashes.
Summary of recent activity in the GreatAjax High Risk Fund
I've divested myself of all Gold holdings at a small loss, in order to diversify a bit out of precious metals. I still hold SLV April 21 calls, which are near worthless right now and represent my largest loss. I will hold them until the bitter end, although Silver has been rallying nicely and I have some hope yet. My favorite precious metal remains Palladium, and I hold in the money April 10 SWC calls that have nearly doubled in value over the past week.
After NVDA's outstanding earnings report and forward guidance, the stock tanked 9%. I took the opportunity to buy in-the-money June 16 calls. I will be looking to roll some money into actual shares of NVDA again very soon. This company is on the verge of staggering growth.
JDSU is my largest stock holding, and I am up nearly 20% during my short tenure as owner. I will hold until I am up at least 100%
LVLT dropped rapidly since I bought it but over the past week it has bounced right back, coming up at the top of the leaderboard twice with 10% gains (truly a stock that trades like an option). I've been toying with the notion of selling LVLT in exchange for shares of IRDM, which runs a communication satellite fleet servicing the military, fishermen, truckers, miners, etc. While both stocks have the potential to explode, IRDM is probably more likely to, given it has less of a debt problem and much less of a market capitalization. But I'll stick with the more familiar fiber optic network of LVLT for the time being.
I still hold ERTS June 20 calls, which are slowly rebuilding their value but still down 65%. I may double down on this bet shortly.
I am very happy with my positions right now; I've been selling out of the money March options, and buying longer dated higher delta ones that should hold their value better through a couple down cycles. I would like to have some puts in the mix but I strongly believe the market will rise short term. When the time comes, look for me to be short RIM.
I am prescient
Hot on the heels of my previous post, here is disturbing news for those who buy miners in politically risky countries. Short version: Africa talking about nationalizing gold mines. Socialism is such a great political system for those in power, they can seize whatever they want and write it off as altruism (ITS FOR THE PEOPLE!!!).
Reiteration of BUY on Stillwater Mining
I have bought back into Stillwater after trading out before its recent sharp pullback. I really like this stock.
Palladium and Platinum are both necessary to catalytic converters (2 grams each per converter, on average), as it is in the nature of these incredibly rare and useful metals to convert harmful gases like carbon monoxide to less harmful ones like carbon dioxide or oxygen. Thus half of all platinum and palladium sales are to auto companies. There are many other industrial uses for these metals (in dentistry and fiber optics, for example), and new uses are being found for them every day. Both metals also make outstanding jewelry. There is a strong case to be made that Palladium and Platinum are objectively equal in value, however Palladium trades at 420 dollars while platinum trades at 1500 dollars. Across the world Palladium is mined 1:1 with Platinum, but at Stillwater, it comes 3.5:1. This means SWC will be nicely levered to upward corrections in the price of Palladium and well insulated against Platinum corrections lower. The risk of Stillwater lies in Palladium going down - it costs around 400 dollars to produce an ounce of PGM metals, so when Palladium gets far below that mark a company like Stillwater suffers. I scoff at that risk, personally.
Stillwater is the only producer of Palladium and Platinum to be found in politically stable countries - all other production is in Russia and Africa. As inflation spirals across the globe and in all currencies, precious metals will look increasingly attractive to corrupt governments desperately clinging to power. Nationalization of miners WILL occur, starting with the most politically unstable countries. This rule of thumb applies to all precious metals: stick to American, Australian, and Canadian producers only - these countries are the most respectful of property rights.
Stillwater has been around a long time, they have 20 million ounces of reserves, and they produce 500K ounces a year. They've come out of restructuring lean and looking good on cash flow. At roughly a billion dollar market capitalization, I love this company. And I love the wild fluctuations in Palladium, this stock will be a day traders dream during the march upward for precious metals, so I will be trading SWC for both the short and long term.
I just re-read my previous bit of anti-Cameron rhetoric
and it made me realize just how much I love the word puerile.
But don't be mad at me, Mr. Cameron. There are plenty of people who don't object to your message, yet watch pirated versions of your film. I will lift my boycott when I can Netflix the Avatar Blu-Ray in 3-D. The tiny amount of money I pay for a 3-day Blu-Ray time-slice (word-pair bonus!) is your well earned reward for pushing the technological envelope - and nothing more.
Why I boycott Avatar
Because ideas matter.
There are plenty of people in this world who don't agree with me on that premise. One of these people might go see Avatar and wonder why I find it offensive: after all, it's a fictional piece of eye candy about an alien world.
But that same person, having witnessed 100 hollywood movies that take a Marxist view of Western Civilization's interaction with the environment (humans are exploiters), will be far less likely to complain when "Cap and Trade" taxes are introduced in the name of saving the environment. Not understanding that ideas matter, this person is simply led along by the subtle and deliberate messages infecting popular culture. To be honest, I believe that most people operate in this fashion.
To James Cameron and me, ideas do matter. To James Cameron, human beings are exploiters and destroyers of our planet. Even as he hypocritically relies on such "exploitation" to produce his vastly expensive films, so he decries it. I believe that Mr. Cameron is not so much a hater of humanity as he is a sycophant to Hollywood (ultimately Marxist) intellectualism. He wants accolades and Oscars, and he understands that the only way his puerile action film will earn such accolades is if it offers a bold Marxist theme. It is the same formula he used in Titanic, which offered a starkly Marxist view of Bourgeousie exploitation of the Proletariat. Now he gives us the "new" Marxism, in which rich and poor alike conspire to exploit the very ground under our feet.
Once upon a time men took pride in exploiting the earth. Such men built this nation. If we were to stop using our minds to alter nature (as we Westerners have learned to do so well) we will naturally revert to savagery. We should know that savagery in reality is nowhere near as noble as James Cameron's Smurf people. We should also know that such a reversion will require a massive, err, adjustment, of the world population, downward.
Quick review of Up
To contrast my previous review, which left a bitter taste in my mouth, let us now discuss Pixar's latest film, Up.
Up is a triumph of film-making that should serve as an example to the Tarantinos of the world as to how it's REALLY done. The introductory sequence in particular is a mesmerizing piece of visual poetry which runs for at least 20 minutes with almost no dialogue. Every frame is so carefully crafted to serve the theme that few words are needed throughout the film. The very shape of the characters - Carl square and confined, Ellie rounded like a balloon - contribute to characterization in a way no actor could replicate.
Up gets major credit for being that rarest of gems: a story that is wholly integrated with it's theme. The theme of Up could be stated as "adventure vs. love", and I hope I am not giving too much away when I say that the resolution of the plot shows that "love IS adventure".
Pixar are making the best films in the industry right now, and Up is their finest yet. It is an injustice that a film this good will not even be nominated for Best Picture, nor Pete Docter for Best Director.
I give Up 4 stars.
Quick review of Inglourious Basterds
Inglourious Basterds is the latest tripe from Quentin Tarantino and it is typically "tarantino-esque", meaning it's loaded with heavy handed efforts to convince the viewer of just how smart and witty the director is. For example, he may introduce a character by plastering that character's name on the screen in big letters, no matter that the character does nothing at all in the film except for stab someone in the neck repeatedly.
Tarantino claims that this film is his attempt to make a "Dirty Dozen", but he fails miserably. Where Dirty Dozen was an escape film with a strong plot, Inglourious Basterds is a sadistic revenge fantasy in which graphic violence and quirky characters are a substitute for plot altogether. The Basterds are presented to us in a series of scenes devoid of context, with the only purpose of each scene being to show us the particular quirk of one or more characters. There's the guy who stabs people, the guy who beats people with baseball bats, and the guy who insists on scalping the enemy, among others.
Look, I could rip this crap apart all day, but it's not worth the waste of words. Avoid Inglourious Basterds, and Quentin Tarantino. I give it 0 stars.
How I'm dealing with the stock market bloodbath
I'm down a bit but thanks to Stillwater Mining my bleeding is not as bad as some. After getting out of my position in SWC, I got back in last friday on a correction, and traded back out this monday for a quick 50% profit. Good thing I did, because SWC is now down to below where I initially sold. I am getting very antsy to buy back in but this stock is still above where it was a month ago, so I will keep eyeballing for now.
My position in silver (SLV) is really being hammered, but I am happy to keep holding it.
I bought back into ABX (Barrick Gold) yesterday after it got destroyed, and it held up today, which is more than most other stocks can say.
After watching the strange action in the markets on the heels of earnings reports, which involved great companies like Intel reporting blow-out earnings and going down after, I decided to hedge all my long positions with a purchase of puts in AMD. I was looking to sell after the AMD conference call. If there is one thing I know, it's that AMD is a shitty company. And my hunch paid off today as AMD was down 10% on the open and I doubled my (admittedly small) investment.
I've been watching Corning stock drop with great interest. Today it dropped 5% and I decided to buy a shitload of February 19 calls as a gamble on their earnings report next week. I predict great things from Corning's earnings and outlook. I believe this pattern of dropping on earnings cannot continue, the earnings are too good. The market is just confused now but people will ultimately realize that having their assets in dollars is far riskier than a stock like GLW.
I continue to hold LVLT, JDSU, ERTS, and GLD, as well.
Buying LVLT
I've been hearing a lot of pundits say that buying Citigroup (C) at 3 dollars and change is like buying an unexpiring option on the financials in general. Personally, I have no idea how to play the financials and the depth of government intervention into that industry scares me away. If I were to buy a bank it would be a solid regional like BBT.
There's always scary government intervention around the corner in the Telecom industry as well. But I work in the industry and I am eager to diversify into it, as I tend to specialize in semiconductors. I believe in the future of telecommunications, and I see an exponential rise in demand for bandwidth still ahead of us. This rise in demand will occur regardless of the state of the economy (short of Atlas Shrugged style blackouts), for the simple reason that its more cost-effective to use the Internet in substitution for myriad real-world activities (must I go into them? Also, please note that I use the word "myriad" properly - it's not "a myriad of"!).
The map above illustrates LVLT's asset, a fiber optic "backbone" that dwarfs most other man-made wonders. The 200+ gigabit per second trans-atlantic network is an astounding feat of engineering. LVLT leases this massive asset out to ISPs who need interconnections.
LVLT has been spending a lot of money to upgrade this network over the past couple years, and at the worst possible time. It has now incurred 6 billion dollars in debt, and has been scrambling to find the cash to service it. But they've done the necessary trimming and they are now out of the woods until 2012, it seems. Return to profitability appears inevitable. This is a company that could start throwing off massive wads of cash very quickly.
The whole Telecom sector is beat down but few worse than LVLT, which has seen its stock price deteriorate to a lowly 1.56, and a rather anemic market capitalization of 2.5 billion dollars. I'd put a value on that map, and the bandwidth it represents, of at least 15 billion dollars.
So LVLT represents an "option" on telecom sort of like Citi for the financials (yeah, I got there). It is a speculative bet but I can't help but buy it as I look at that map. Barring a bottoming of SWC, I will buy some tomorrow.
Another note on the ERTS trade
The trade previously outlined, my friends, marks my first foray into video game speculation since my very first call option purchase: Take-Two Interactive (TTWO). I lost everything in that trade. I have been loath to re-enter since, but I believe I have learned my lesson. Some might say, the lesson is not to speculate with a "long call" options strategy at all, but then, some are pussies.
Buying Electronic Arts and GLD, selling Stillwater
I said Stillwater Mining (SWC) was the best investment idea I could come up with, a month or so ago when it was at 9.50.
Well, yesterday was one of those days I dream about as a stock speculator, in which Stillwater rose 17% in a single day. It had previously risen 6% on monday. This, apparently, on speculation about what the imminent creation of a Platinum/Palladium ETF (which will hold solid bullion a la GLD) will do to a seriously supply-constricted market. I sold with SWC at 12 dollars for a very handsome profit in my April 10 calls. Because of the highly speculative nature of this recent sharp rise, I would recommend repurposing any money in SWC into other precious metals, and keeping a sharp eye out for future dips.
I repurposed some of my SWC profits into GLD March 120 calls. I am pretty certain to lose everything on my ABX January bet which I outlined in an earlier post, so I wanted badly to get back into gold longer term. It was a stupid mistake to buy options for a highly volatile stock as ABX and for such a short time frame. In the future, if I am going to buy gold stock, I will buy ABX, but for options I will stick with the less volatile GLD.
I repurposed a larger share of those profits into ERTS Jun 20 calls. The video game industry is a shambles and it always has been. One day a company is on top of the world; the next it is bankrupt. Well, ERTS will avoid bankruptcy but it is no logner on top of the world. Activision has been kicking its ass all over the place with the new Call of Duty. ERTS was at 50 dollars as recently as 2008 but it has made a series of tactical blunders that have driven the share price down to 18 dollars today.
ERTS now has half the market cap that ATVI does, and this is not right. ATVI has been making smart moves but the video game industry is vicious and it won't be long before ERTS is on top again (these two companies are the only dominant "pure play" video game stocks - MSFT and SNE being the "non-pure" dominant players). It is difficult to overestimate the value of the EA Sports franchise. And EA still delivers LOTS of quality top-tier games. I'm playing one right now - Dragon Age.
You don't buy stock in video game companies. These are not reliable companies for the long term. But in the short term, with Call of Duty behind ATVI, I believe momentum will soon shift back into EA's favor, and I like the odds on the Jun 20 calls.
Tanning is good, socialized medicine is bad
It is clearly evident that vitamin D is good for you and we need a LOT of it. And there is no doubt that the rays of the sun are natures intended way of injecting us with this vitamin. Tanning is also an excellent way to keep the skin from developing sores or excessive acne. Anyone who works in a tanning salon can tell you these facts and others (I worked in one myself for a time).
"Scientific consensus" has for some time now told us just the opposite: that the rays of the sun will KILL YOU. "Scientific consensus" has gone so far over the top in this belief that it is now backpedaling in the face of recent studies indicating precisely the opposite, as explained in the link above. But then, "Scientific consensus" is as prone to be incorrect as any other "thing sarcastically encased in quotation marks". Scientists are not immune to group think - just look at their embrace of "eugenics" in the 1930's, or "anthropogenic global warming" right now.
Yes, there are health risks associated with tanning - but those risks are from excessive tanning, or burning. People die from drinking excessive water as well.
Perhaps you're one of those people without any firm convictions, and you just want to get along and have everyone like you. When the subject of tanning comes up at the coffee machine at work, you will exclaim it bad and the others will nod their heads in agreement at how forcefully you reiterated the "consensus" view. But be careful going forward, because it does appear that "consensus" is beginning to shift.
Politicians understand that people think ill of tanning, and they are using this sentiment to try and impose a 10% tax on artificial tanning, with which they will fund a minute portion of their massive health care "reform". Already they impose the "consensus" fad of the day into their schemes, even as that fad is dying before their eyes. No doubt they will find plenty of grant money to fund new studies "proving" UV radiation kills, rather than admit their stupidity.
The Story, and why I bought JDSU
When I buy stocks and options, I like to have conviction in a story that I feel will play out; one that runs contrary to common wisdom. So here is one of the stories I currently subscribe to and the various ways I can play it.
We all know mobile phones and computing are growing rapidly. And most in Wall Street (myself included) concur that this market will continue to grow rapidly for the foreseeable future.
Where I differ from Wall Street is that traders are focused primarily on the phone producers. Research in Motion, maker of the Blackberry, is a case in point. In my mind RIMM is a fad that has been latched onto by businesses. They were first to market with a business-friendly, secure phone/email device, and businesses across America have been buying Blackberries by the bushel. The Blackberry has become a status symbol and a required acessory for the businessman. RIMM shares are near their all time high and trading at something like a 45 p/e multiple as a result.
But what differentiates RIMM from its competition? Simply put, centralized server software. This is not much of a moat. More and more companies eager to eat into RIMM's share are creating such software themselves. And as to the gadget itself, well, RIMM has no technological edge. The iPhone is superior techology, as is the new Google phone. Palm phones are essentially identical to RIMM offerings.
I believe no one will remember RIMMs name in 10 years. It won't take long for businesses to start buying other brands of smartphones for their executives, and then the herd will change in an instant and RIMM will no longer be cool. Mark my words, this will happen.
So I often consider buying put options in RIMM, which would also be a hedge against a general bear market.
Now, if the gadgets themselves are not the way to play mobile, what is? We need to look at the fundamentals of the mobile market. It's not the gadget itself, its whats inside it that matters. Also, whatever happens in mobile, the data providers MUST keep growing their fiber optic networks in order to keep up with exponentially rising demand. When you talk on your cell phone, your voice only travels over the air to the nearest cell tower. From there it is transported via fiber to its destination, a long way away.
JDSU makes the patent-protected innards of high end optical switching gear - the kind of gear that takes one strand of fiber and "multiplexes" 32 different ten gigabit channels into and out of it. If you open a Cisco DWDM card and look inside you will see "JDSU" etched into every key component. JDSU also makes test equipment which is absolutely necessary for the upcoming upgrades to 40gig fiber. In most current networks, an unqualified fiber can easily run ten gig of data through (even multiplexed into 320 gig as described above). In the near future, 40 and 100gig fiber upgrades will become necessary (which will also be multiplexed 32 and maybe 64 times). These upgrades generally DO NOT WORK without some serious troubleshooting, using JDSU equipment. JDSU has a near monopoly in this space. And their shit ain't cheap. Can you tell I do this for a living?
Corning makes the actual fiber that we qualify with the JDSU test sets. Corning fiber is of such high quality that customers will be flocking to them when their crap generic fiber does not work in 40 and 100gig. Moreover, Corning makes the LCD glass used in phones, particularly touch screen glass.
Nvidia makes GPUs for mobile devices that can play high resolution 720p video in a tiny form factor with little power draw. No other company can make this claim currently. Nvidia has a marked technological edge in graphics rendering in mobile devices, and it does not appear this will change any time soon. More and more gadget makers are buying the Nvidia Ion platform to incorporate into their devices, and this trend will continue.
So this is one story that circulates around my head. Corning has done very well and I have sold it off, but I may well look to get back in as I believe there is still a lot of upside. Nvidia has also done EXTREMELY well and as I explained earlier, I stupidly got out early. I still believe that in the enar term Nvidia will suffer in the transition to 40nm and intense competition from AMD in the desktop GPU segment, which remains Nvidia's cash cow - for now.
I have the bulk of my money in JDSU right now. I had to break a rule of mine in order to do this, as JDSU has historically been a mess of a company, overexpanding and losing focus during the stock market bubble, and paying a steep price in recent years as a result. Usually, I like to buy a company with a consistent history of rising profits. JDSU has been losing money for a long time.
BUT ... JDSU is now focused where I believe they should be - on fiber. Their market capitalization has come down to a mere 1.8 billion, which is not far above their yearly revenue. Their products are destined to be ever more in demand over the next few years. I believe this stock could easily double from its current 8.50, over the next year. I will keep my eye on Nvidia and Corning, but in the near term, my money is in JDSU.
And, of course, from a different story, precious metals.
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